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Green Grow Inc. (GGI) manufactures lawn fertilizer. Because of the product's very high quality, GGI often receives special orders from agricultural research groups. For each type of fertilizer sold, each bag is carefully filled to have the precise mix of components advertised for that type of fertilizer. GGI's operating capacity is 41.000 one-hundred- pound bags per month, and it currently is selling 39,000 bags manufactured in 39 batches of 1,000 bags each. The firm just received a request for a special order of 8.800 one-hundred-pound bags of fertilizer for S260.000 from APAC, a research organization. The production costs would be the same, but there would be no variable selling costs. Delivery and other packaging and distribution services would cause a one-time $6,000 cost for GGI. The special order would be processed in two batches of 4,400 bags each. (No Incremental batch-level costs are anticipated. Most of the batch-level costs in this case are short-term fixed costs, such as salaries and depreciation.) The following information is provided about GGI's current operations: Si $ 46 nd protection rest disa for 39,000 tys, garby: Sales price Variable intring Pos Variable selline costs Fixed during COSTS Fixed marketing costs No marketing costs would be associated with the special order. Because the order would be used in research and consistency is critical, APAC requires that GGI fill the entire order of 8,800 bags.

Answer 1

Green Grow
1)
Out-of-Pocket Costs
Variable costs:
Manufacturing cost (8800 x $19 per unit)			$    167,200.00
Fixed costs:
One-Time Packing & Delivery Cost Opportunity Cost:			$        6,000.00
No. of lost unit sales (if any)
CM per unit, regular sales:		6800
Selling price, per unit	$             46.00
Variable manufacturing cost	$           (19.00)
Variable selling cost	$             (2.00)	$             25.00	$    170,000.00
Total Relevant Cost			$    343,200.00
Since the 88 00 unit order would exceed GGI’s capacity. Currently, GGI has only 2,000 units of available capacity (41,000 units – 39,000 units)so No. of lost unit sales will be 8800 -2000 = 6800
2)
Price of the special order	$    260,000.00
Total Relevant Cost	$    343,200.00
Operating cost would Decreased by	$      83,200.00
3)
Total relevant cost (from Part 1 above)	$    343,200.00
Divided by no. of units in the special order =	8800
Breakeven selling price per unit =	$             39.00
4)
Units	39,000.00		32,200.00	Special order = 8800
	Current Situation		Current Situation + Special Sales Order
Sales:
Regular (@$46/unit)	$ 1,794,000.00		$ 1,481,200.00
Special order (@ $39/unit)	$                   -	$ 1,794,000.00	$    343,200.00	$ 1,824,400.00
Less: Variable Costs:
Manufacturing (@$19/unit)	$    741,000.00		$    779,000.00
Marketing (@ $2/unit)	$      78,000.00	$    819,000.00	$      64,400.00	$    843,400.00
Contribution Margin		$    975,000.00		$    981,000.00
Less: Fixed Costs:
Manufacturing	$    780,000.00		$    780,000.00
Marketing	$    117,000.00		$    117,000.00
One-Time Packing/Delivery	$                   -	$    897,000.00	$        6,000.00	$    903,000.00
Operating Income		$      78,000.00		$      78,000.00
Variable selling costs ($2/unit) are not incurred on the special sale units.

B E Green Grow =8800*19 6000 Out-of-Pocket Costs 4 Variable costs: 5 Manufacturing cost (8800 x $19 per unit) 6 Fixed costs: 7 One-Time Packing & Delivery Cost Opportunity Cost: 8 No. of lost unit sales (if any) 9 CM per unit, regular sales: 10 Selling price, per unit Variable manufacturing cost 12 Variable selling cost 13 Total Relevant Cost 6800 -19 -2 =B10+B11+B12 =C9*C12 =SUM(D5:012) Since the 88 00 unit order would exceed GGI's capacity. Currently, GGI has only 2,000 units of 14 available capacity (41,000 units - 39,000 units)so No. of lost unit sales will be 8800-2000 = 6800 162) Price of the special order Total Relevant Cost 19 Operating cost would Decreased by 260000 =D13 --(B17-B18) 213) Total relevant cost (from Part 1 above) Divided by no. of units in the special order = 24 Breakeven selling price per unit = 23 =D13 8800 =B22/B23 Units 39000 Special order = 8800 =B27-6800 Current Situation + Special Sales Order Current Situation =B27*46 =0 =D2746 =8800*39 =B30+B31 =D30+D31 =B27*19 =B27*2 =41000*19 =D27*2 29 Sales: 30 Regular (@$46/unit) 31 Special order (@ $39/unit) 32 Less: Variable Costs: 33 Manufacturing (@$19/unit) 34 Marketing (@ $2/unit) 35 Contribution Margin 36 Less: Fixed Costs: 37 Manufacturing 38 Marketing 39 One-Time Packing/Delivery 40 Operating Income =B33+B34 =C31-C34 =D33+D34 =E31-E34 =B27*20 =B273 =B37 =B38 D7 =B37+B38+B39 =C35-C39 =D37+D38+D39 =E35-E39